A rug pull is a type of crypto exit scam in which a development team deliberately abandons a project and removes all its liquidity, leaving token holders with assets they cannot sell. The term comes from the phrase “to pull the rug out from under someone,” meaning to withdraw support suddenly and without warning.
Most rug pulls follow a predictable pattern.
The team then uses social media, influencer promotions, and community channels to build hype and drive up the token price.
Once the price has risen and the project has access to its liquidity, the rug pullers typically choose between two options: sell off tokens, crashing the value for everyone else, or drain the liquidity pool, making it impossible for other holders to sell.
This is a type of hard rug pull and the most common DeFi form. Developers supply liquidity to a DEX pool and receive liquidity pool (LP) tokens representing their share. Once the price has risen, they use those LP tokens to withdraw the underlying assets, leaving the pool empty and the token worthless.
No malicious code is involved. Instead, the team simply sells off a large portion of their token allocation rapidly, which tanks the price and drives away investors. While technically legal in many cases, this behavior is widely considered deceptive and harmful.
Warning signs of a potential rug pull include:
Unsustainable yield promises
Keeping the above in mind, you can take several measures to protect yourself:
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